UK rejects tourism VAT rate cut

Following a debate in the UK's House of Commons this morning, David Gauke (Treasury Minister) said that the UK government will not consider a reduction in the UK VAT rate for the tourist industry. The government warned that there is no proven link between tax subsidies and tourist numbers. A reduction in the tourism VAT rate to 5% would cost the Exchequer up to £10bn per annum.

The debate, sponsored by a number of MPs from the South and Northern Ireland considered the UK matching the VAT subsidies provided in a number of other EU member states. The UK currently charges the full standard VAT rate of 20% on hotel accommodation, cinemas, visitor attractions, restaurants and cafes. Ireland cut tourism VAT to 9% in July 2011.

UK higher tourism VAT rate

The tourism industry is seriously disadvantaged compared to its European competitors. Ireland levies only 9% VAT, and has seen over 9,000 new jobs created since it dropped its rate. France and Germany only charges 7% on hotel stays. Last year, Greece reduced VAT on tourism to 13% following a protracted negotiation with the European Commission, European Central Bank and International Monetary Fund.

VP Global Indirect Tax

Richard Asquith

VP Global Indirect TaxRichard Asquith

Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.